2016 (2) TMI 501 - AT - Income Tax

Tribunal upholds tax on foreign income & vessels under Sec 44BB, applies amendments prospectively

The Tribunal dismissed the assessee's appeal, upholding the inclusion of revenue from work performed outside India under Section 44BB and the taxability ... Assessment u/s 44BB - Including revenue from part of contract executed outside Indian taxable territory, for the purpose of aggregate amount referred under sub-section (2) of Section 44BB - Held that:- Revenue/receipt from mobilisation charges (i.e. for work performed outside India) received by the assessee has been rightly taken for the purpose of amount referred under sub-section (2) of Section 44BB of the Act by the Ld CIT(A) and thus no interference is required on his findings on the issue in dispute. Accordingly, this ground of appeal of the assessee is dismissed. Income from hiring of the vessels was rightly held as taxable under Section 44BB of the Act by the ld CIT(A) and no interference is required in finding of the ld CIT(A) on the issue in dispute. Retrospectivity of amendment - Held that:- The amendment brought by the Finance Act, 2011 cannot be made effect from the retrospective effect as that it adversely affects the interest of the assessee. We are in agreement with the findings of the Hon’ble Supreme Court in the case of Sedco Forex International Drilling Incorporation Vs. Commissioner of Income Tax, (2005 (11) TMI 25 - SUPREME Court ) that clarificatory provisions should be made applicable form the date when the main provision was introduced. In above judgment it is also held that if the amendment changes the law , it has to be prospective in nature. The Tribunal in the case of the assessee for AY 2008-09 cited above have already been dealt the arguments of the Commissioner of Income Tax(Departmental Representative ) that the effect of amendment carried out in Section 44BB and Section 44DA are not having retrospective effect Interest under section 234B - Held that:- Though the issue in dispute has already been decided in favour of the assessee by the Tribunal in AY 2008-09, but facts in the year under consideration may be different as regards to role of the assessee in getting lower or no deduction of certificate, following the judgement of the Jurisdictional High Court in the case of Jacabs Civil Incorporated (2010 (8) TMI 37 - DELHI HIGH COURT ) , we restore the issue to the file of Assessing Officer for verification of the fact , whether any certificate of lower or no deduction of tax was obtained and provided by the assessee to the payer, and if the answer is negative, no interest under section 234B of the Act is chargeable in the case of the assessee Issues Involved:1. Inclusion of revenue from work performed outside India under Section 44BB.2. Nature of income from providing vessels and equipment, and its taxability under Section 44BB versus Section 9(1)(vi) and 9(1)(vii).3. Applicability of amendments to Section 44BB and Section 44DA.4. Interest under Section 234B.Issue-wise Detailed Analysis:1. Inclusion of Revenue from Work Performed Outside India:The assessee, a non-resident company, provided specialized vessels and crew to another non-resident company for survey work related to gas production in India. The Assessing Officer (AO) included revenue from activities outside India in the gross contract receipts under Section 44BB, treating it as fee for technical services (FTS) under Section 9(1)(vii). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this inclusion, referring to the jurisdictional High Court's decision in Sedco Forex International Drilling Inc. 299 ITR 238, which held that mobilization charges (work performed outside India) are includible under Section 44BB. The Tribunal, following this binding precedent, dismissed the assessee's appeal, affirming that revenue from mobilization charges was rightly included under Section 44BB.2. Nature of Income from Providing Vessels and Equipment:The Revenue argued that the income from providing vessels and equipment should be taxed as FTS under Sections 9(1)(vi) and 9(1)(vii), not under Section 44BB. The CIT(A) and the Tribunal, however, held that the income was taxable under Section 44BB, following the Tribunal's decision for the previous assessment year (AY 2008-09) in the assessee's case. The Tribunal noted that the nature of the vessels and the status of the assessee as a second-leg contractor remained unchanged, thus affirming the CIT(A)'s decision to tax the income under Section 44BB.3. Applicability of Amendments to Section 44BB and Section 44DA:The Revenue contended that the amendments brought by the Finance Act, 2011, to Section 44BB and Section 44DA should be applied retrospectively, as they were clarificatory. The Tribunal, however, held that these amendments, which adversely affect the assessee, should be applied prospectively. The Tribunal cited the Supreme Court's ruling in Sedco Forex International Drilling Inc. v. CIT, which stated that clarificatory amendments should be read into the main provision from the date it came into force only if they do not change the law. Thus, the Tribunal dismissed the Revenue's grounds, following its earlier decision in the assessee's case for AY 2008-09.4. Interest under Section 234B:The Revenue argued that interest under Section 234B should be charged, relying on the Uttarakhand High Court's decision in Maersk Co. Ltd. v. DIT. The Tribunal, referencing the Delhi High Court's decision in DIT v. Jacobs Civil Incorporated, held that interest under Section 234B is not chargeable if the assessee had no role in obtaining a lower or no deduction certificate. The Tribunal remanded the issue to the AO to verify if the assessee had obtained such a certificate. If not, no interest under Section 234B should be charged.Conclusion:The Tribunal dismissed both the assessee's appeal and cross-objection, affirming the CIT(A)'s inclusion of revenue from work performed outside India under Section 44BB and the taxability of income from providing vessels and equipment under Section 44BB. The Tribunal also held that the amendments to Section 44BB and Section 44DA should be applied prospectively and remanded the issue of interest under Section 234B to the AO for verification. The Revenue's appeal was partly allowed for statistical purposes.